PART I Item 1. Financial Statements This section presents Farmer Mac's unaudited consolidated financial statements for the quarter ended March 31, 2025, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes on significant accounting policies, investment securities, Farmer Mac Guaranteed Securities, USDA Securities, financial derivatives, loans, guarantees and commitments, notes payable, equity, fair value disclosures, and business segment reporting Consolidated Balance Sheets Total assets increased by $479.2 million to $31.80 billion, primarily from new loan volume and a larger investment portfolio, while total liabilities rose by $442.6 million to $30.28 billion due to higher notes payable, and total equity increased by $36.6 million to $1.53 billion from retained earnings | Metric | March 31, 2025 (in billions) | December 31, 2024 (in billions) | Change (in millions) | Change (%) | |:---|:---|:---|:---|:---| | Total Assets | $31.80 | $31.32 | $479.2 | 2% | | Total Liabilities | $30.28 | $29.84 | $442.6 | 1% | | Total Equity | $1.53 | $1.49 | $36.6 | 2% | - The increase in total assets was primarily attributable to new loan volume and a larger investment portfolio236 - The increase in total liabilities was primarily due to an increase in total notes payable to fund the acquisition of loan volume237 - The increase in total equity was primarily due to an increase in retained earnings237 Consolidated Statements of Operations For the three months ended March 31, 2025, Farmer Mac reported a net income of $49.65 million, a decrease from $53.75 million in the prior year, mainly due to a provision for losses compared to a prior-year release, and a decrease in total interest income, partially offset by lower total interest expense | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---| | Total interest income | $381.41 | $396.32 | | Total interest expense | $290.48 | $309.95 | | Net interest income | $90.94 | $86.37 | | (Provision for)/release of losses | $(1.68) | $1.80 | | Income before income taxes | $63.13 | $68.25 | | Net income | $49.65 | $53.75 | | Net income attributable to common stockholders | $43.99 | $46.96 | | Basic earnings per common share | $4.04 | $4.33 | | Diluted earnings per common share | $4.01 | $4.28 | Consolidated Statements of Comprehensive Income Comprehensive income for the three months ended March 31, 2025, was $59.99 million, a significant decrease from $89.77 million in the prior year, primarily driven by lower net unrealized gains on available-for-sale securities and net unrealized losses on cash flow hedges | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---| | Net income | $49.65 | $53.75 | | Net unrealized gains on available-for-sale securities | $21.76 | $39.95 | | Net unrealized (losses)/gains on cash flow hedges | $(8.37) | $6.29 | | Other comprehensive income net of tax | $10.34 | $36.03 | | Comprehensive income | $59.99 | $89.77 | Consolidated Statements of Equity Total equity increased to $1.53 billion as of March 31, 2025, from $1.49 billion at December 31, 2024, primarily due to net income and other comprehensive income, partially offset by cash dividends paid on preferred and common stock | Metric | December 31, 2024 (in millions) | March 31, 2025 (in millions) | |:---|:---|:---| | Total Equity (Beginning Balance) | $1,489.03 | $1,489.03 | | Net Income | $49.65 | $49.65 | | Other comprehensive income, net of tax | $10.34 | $10.34 | | Cash dividends: Preferred stock | $(5.67) | $(5.67) | | Cash dividends: Common stock | $(16.35) | $(16.35) | | Issuance of Class C Common Stock | $0.12 | $0.12 | | Stock-based compensation cost | $3.53 | $3.53 | | Other stock-based award activity | $(5.00) | $(5.00) | | Total Equity (Ending Balance) | $1,525.65 | $1,525.65 | Consolidated Statements of Cash Flows Cash and cash equivalents increased by $24.13 million to $1.05 billion as of March 31, 2025, compared to $1.02 billion at the end of 2024, driven by significant cash provided by financing activities, partially offset by cash used in investing and operating activities | Cash Flow Activity | March 31, 2025 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---|\ | Net cash provided by operating activities | $(49.82) | $233.34 | | Net cash used in investing activities | $(345.88) | $(525.47) | | Net cash provided by financing activities | $419.83 | $148.54 | | Net change in cash and cash equivalents | $24.13 | $(143.60) | | Cash, cash equivalents, and restricted cash at end of period | $1,048.14 | $745.11 | Notes to Consolidated Financial Statements The notes provide detailed explanations and disclosures for the consolidated financial statements, covering accounting policies, specific financial instruments, loan portfolio details, guarantees, debt, equity, fair value measurements, and segment reporting, with key updates on new accounting standards and portfolio performance 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines Farmer Mac's significant accounting policies, including principles of consolidation, calculation of earnings per common share, and comprehensive income, detailing recently issued accounting guidance not yet adopted - Farmer Mac's consolidated financial statements include its two subsidiaries (Farmer Mac Mortgage Securities Corporation and Farmer Mac II LLC) and Variable Interest Entities (VIEs) where Farmer Mac is the primary beneficiary28 | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---|\ | Net income attributable to common stockholders (Basic EPS) | $43.99 | $46.96 | | Weighted Average Shares (Basic EPS) | 10,896 | 10,847 | | Basic EPS | $4.04 | $4.33 | | Net income attributable to common stockholders (Diluted EPS) | $43.99 | $46.96 | | Weighted Average Shares (Diluted EPS) | 10,983 | 10,969 | | Diluted EPS | $4.01 | $4.28 | - ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures) are not expected to have a material impact on Farmer Mac's financial position, results of operations, or cash flows upon adoption38 2. INVESTMENT SECURITIES Farmer Mac's investment securities portfolio, primarily available-for-sale and held-to-maturity, saw an increase in fair value for available-for-sale securities to $6.23 billion as of March 31, 2025, from $5.95 billion at December 31, 2024, with unrealized losses considered recoverable due to high credit quality | Security Type | March 31, 2025 Fair Value (in billions) | December 31, 2024 Fair Value (in billions) | |:---|:---|:---|\ | Total Available-for-sale | $6.23 | $5.95 | | Total Held-to-maturity | $0.01 | $0.01 | - Unrealized losses on available-for-sale investment securities were $122.44 million as of March 31, 2025, primarily due to a general widening of market spreads and changes in interest rates3944 - All investment securities in an unrealized loss position are backed by the full faith and credit of the U.S. government, a U.S. government sponsored enterprise, or have credit ratings of at least 'AA+', and Farmer Mac believes these losses are recoverable44 3. FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES The fair value of Farmer Mac Guaranteed Securities and USDA Securities held-to-maturity decreased to $4.62 billion as of March 31, 2025, from $4.81 billion at December 31, 2024, while available-for-sale securities increased to $5.62 billion from $5.51 billion, with unrealized losses mainly due to interest rate changes but covered by U.S. government guarantee | Security Type | March 31, 2025 Fair Value (in billions) | December 31, 2024 Fair Value (in billions) | |:---|:---|:---|\ | Total Held-to-maturity | $4.62 | $4.81 | | Total Available-for-sale | $5.62 | $5.51 | | Trading USDA Securities | $0.00 | $0.00 | - Unrealized losses on these securities are primarily due to changes in interest rates51 - The credit exposure related to Farmer Mac's USDA Securities is covered by the full faith and credit guarantee of the United States of America52 4. FINANCIAL DERIVATIVES Farmer Mac uses financial derivatives, primarily interest rate swaps, to manage interest rate risk, not for speculation, with a total notional amount of $24.01 billion and a net liability of $35.52 million as of March 31, 2025, expecting to reclassify $9.1 million after-tax from accumulated other comprehensive income to earnings over the next twelve months - Farmer Mac uses financial derivatives to protect against market price or interest rate movements on assets, cash flows, or debt issuance, not for trading or speculative purposes58 | Metric | March 31, 2025 (in billions) | December 31, 2024 (in billions) | |:---|:---|:---|\ | Total Notional Amount | $24.01 | $24.90 | | Total Financial Derivatives (Asset Fair Value) | $0.03 | $0.03 | | Total Financial Derivatives (Liability Fair Value) | $(0.06) | $(0.08) | | Net Fair Value | $(0.04) | $(0.05) | - Farmer Mac expects to reclassify $9.1 million after-tax from accumulated other comprehensive income to earnings over the next twelve months related to cash flow hedges63 5. LOANS Farmer Mac's total loans, net of allowance, increased to $13.62 billion as of March 31, 2025, from $13.20 billion at December 31, 2024, with the allowance for losses increasing to $25.06 million due to new loan volume in Infrastructure Finance and Corporate AgFinance, and increases in delinquencies and substandard assets in Agricultural Finance | Loan Category | March 31, 2025 (in billions) | December 31, 2024 (in billions) | |:---|:---|:---|\ | Total loans, net of allowance | $13.62 | $13.20 | | Agricultural Finance loans | $8.88 | $8.83 | | Infrastructure Finance loans | $5.11 | $4.77 | | Allowance for losses | $(0.03) | $(0.02) | | Delinquency Status (Agricultural Finance) | March 31, 2025 (in millions) | December 31, 2024 (in millions) | |:---|:---|:---|\ | Total Past Due | $39.63 | $30.11 | | Nonaccrual loans | $196.71 | $168.92 | - The $1.0 million net provision to the allowance for the Infrastructure Finance portfolio was primarily attributable to new loan volume within the Renewable Energy and Power & Utilities segments76 - The $0.8 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio was primarily attributable to new loan volume77 6. GUARANTEES AND COMMITMENTS Farmer Mac's guarantee and commitment obligation decreased slightly to $47.68 million as of March 31, 2025, from $48.33 million at December 31, 2024, with the reserve for losses also decreasing due to ratings upgrades, and a maximum potential exposure of $4.15 billion under Long-Term Standby Purchase Commitments | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | |:---|:---|:---|\ | Guarantee and commitment obligation | $47.68 | $48.33 | | Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities | $414.29 | $426.31 | | Maximum principal amount (LTSPCs) | $4,146.72 | $4,029.02 | | Reserve for Losses | $1.52 | $1.62 | - The release from the reserve for losses during first quarter 2025 for both Agricultural Finance and Infrastructure Finance was primarily due to ratings upgrades91 | Delinquency Status (Agricultural Finance) | March 31, 2025 (in millions) | December 31, 2024 (in millions) | |:---|:---|:---|\ | Total Past Due | $17.71 | $10.38 | 7. NOTES PAYABLE Farmer Mac's total notes payable increased to $27.98 billion as of March 31, 2025, from $27.37 billion at December 31, 2024, primarily comprising discount notes and medium-term notes, with a weighted-average rate of 3.55% and unused statutory authority to borrow up to $1.5 billion from the U.S. Treasury | Metric | March 31, 2025 (in billions) | December 31, 2024 (in billions) | |:---|:---|:---|\ | Total Notes Payable | $27.98 | $27.37 | | Total principal net of discounts | $28.05 | $27.52 | | Weighted-Average Rate (Total principal net of discounts) | 3.55% | 3.51% | - Farmer Mac has statutory authority to borrow up to $1.5 billion from the U.S. Treasury to fulfill guarantee obligations, which has not been used as of March 31, 2025100101 - During the three months ended March 31, 2025, Farmer Mac called $488.5 million of callable medium-term notes99 8. EQUITY Farmer Mac's core capital level was $1.5 billion as of March 31, 2025, exceeding the minimum capital requirement by $600.8 million, and the company paid a quarterly common stock dividend of $1.50 per share while renewing its share repurchase program with $9.8 million remaining authorization - Farmer Mac paid a quarterly dividend of $1.50 per share on all classes of its common stock during first quarter 2025103 - The share repurchase program was renewed in February 2025, with a remaining authorization of up to $9.8 million and an extended expiration date to February 2027104 | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | |:---|:---|:---|\ | Minimum capital requirement | $926.70 | $917.60 | | Core capital level | $1,525.65 | $1,489.03 | | Capital above minimum requirement | $600.80 | $583.50 | 9. FAIR VALUE DISCLOSURES Farmer Mac's fair value disclosures categorize assets and liabilities into Level 1, 2, and 3 based on valuation inputs, with Level 3 assets representing 18% of total assets and 47% of financial instruments measured at fair value as of March 31, 2025, and total assets at fair value of $11.89 billion and total liabilities of $63.39 million | Metric | March 31, 2025 (in billions) | December 31, 2024 (in billions) | |:---|:---|:---|\ | Total Assets at fair value | $11.89 | $11.51 | | Total Liabilities at fair value | $0.06 | $0.08 | | Level 3 assets as % of total assets | 18% | 18% | | Level 3 assets as % of financial instruments at fair value | 47% | 48% | - There were no material assets or liabilities measured at fair value on a non-recurring basis, and no transfers within the fair value hierarchy during the three months ended March 31, 2025 and 2024110111 - Significant unobservable inputs for Level 3 assets include discount rates and constant prepayment rates (CPR), with discount rates for AgVantage securities ranging from 4.7% to 5.1% (weighted average 4.8%) as of March 31, 2025115 10. BUSINESS SEGMENT REPORTING Farmer Mac operates through seven reportable segments, with total segment core earnings for the three months ended March 31, 2025, totaling $62.34 million, and Farm & Ranch contributing the largest share at $26.27 million, while total on- and off-balance sheet segment assets at principal balance were $29.76 billion - Farmer Mac has seven reportable segments: Farm & Ranch, Corporate AgFinance, Power & Utilities, Broadband Infrastructure, Renewable Energy, Funding, and Investments119 | Segment | March 31, 2025 Core Earnings (in millions) | March 31, 2024 Core Earnings (in millions) | |:---|:---|:---|\ | Farm & Ranch | $26.27 | $25.04 | | Corporate AgFinance | $4.64 | $5.21 | | Power & Utilities | $3.44 | $3.31 | | Broadband Infrastructure | $2.43 | $3.51 | | Renewable Energy | $1.97 | $0.02 | | Funding | $22.76 | $23.63 | | Investments | $0.83 | $(0.20) | | Total Segment Core Earnings | $62.34 | $60.52 | | Segment | March 31, 2025 Total On- and Off-Balance Sheet Segment Assets at Principal Balance (in billions) | |:---|:---|\ | Farm & Ranch | $18.09 | | Corporate AgFinance | $1.89 | | Power & Utilities | $7.19 | | Broadband Infrastructure | $0.97 | | Renewable Energy | $1.61 | | Total | $29.76 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Farmer Mac's financial condition and results of operations for the quarter ended March 31, 2025, covering forward-looking statements, business overview, non-GAAP measures, detailed results, future outlook, balance sheet review, risk management, liquidity, capital resources, and supplemental information Forward-Looking Statements This section highlights that the report contains forward-looking statements regarding Farmer Mac's future financial results, business prospects, and developments, which involve assumptions, estimates, and risks, and actual results could differ materially due to various known and unknown factors - Forward-looking statements in the report address Farmer Mac's prospects for earnings, business volume growth, trends in net interest income and net effective spread, portfolio credit quality, expenses, investment securities, asset impairments, capital position, and future dividend payments132 - Various factors could cause actual results to differ materially, including the availability of debt and equity financing, legislative/regulatory/political developments, fluctuations in asset fair value, lender interest, growth in agricultural/infrastructure indebtedness, economic conditions (inflation, interest rates, trade policies, supply chain, commodity prices), interest rate risk exposure, financial market developments, Federal Reserve policies, and other factors affecting agricultural lending or borrower repayment capacity (weather, real estate values)133134 Overview Farmer Mac provided $1.8 billion in liquidity in Q1 2025, maintaining strong liquidity and capital, with net income attributable to common stockholders decreasing year-over-year by $3.0 million to $43.99 million, while core earnings increased by $2.6 million to $45.97 million due to net effective spread growth, and outstanding business volume increased by $0.2 billion to $29.8 billion - During Q1 2025, Farmer Mac provided $1.8 billion in liquidity and lending capacity, maintained strong liquidity and capital well above regulatory requirements, and had uninterrupted access to debt capital markets138 | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---|:---|\ | Net income attributable to common stockholders | $43.99 | $50.85 | $46.96 | | Core earnings | $45.97 | $43.55 | $43.39 | - The $3.0 million year-over-year decrease in net income was primarily due to a $3.7 million after-tax decrease in fair value of financial derivatives and a $2.7 million after-tax increase in provision for credit losses, partially offset by a $3.6 million after-tax increase in net interest income140 - The $2.6 million year-over-year increase in core earnings was due to a $5.5 million after-tax increase in net effective spread, partially offset by a $2.7 million after-tax increase in provision for credit losses142 - Outstanding business volume was $29.8 billion as of March 31, 2025, a net increase of $0.2 billion from December 31, 2024, primarily from Infrastructure Finance, partially offset by a decrease in Agricultural Finance148 Use of Non-GAAP Measures Farmer Mac utilizes non-GAAP measures like "core earnings," "core earnings per share," and "net effective spread" to provide a clearer view of its economic performance, transaction economics, and business trends, excluding fair value fluctuations and infrequent or unusual transactions - Farmer Mac uses non-GAAP measures (core earnings, core earnings per share, net effective spread) to assess corporate economic performance and develop financial plans, as they are useful in understanding economic performance, transaction economics, and business trends154 - Core earnings and core earnings per share exclude the effects of fair value fluctuations and specified infrequent or unusual transactions not indicative of future operating results156 - Net effective spread measures the net spread earned between interest-earning assets and related net funding costs, including associated derivatives, differing from net interest income by reclassifying consolidated trust interest to guarantee fees and including accruals for undesignated financial derivatives157158159160161 Results of Operations Farmer Mac's results of operations for Q1 2025 show a year-over-year increase in net effective spread by $6.9 million to $89.99 million, primarily due to new business volume, while net income attributable to common stockholders decreased to $43.99 million, and operating expenses rose by 8% Net Interest Income Net interest income increased by $4.6 million year-over-year to $90.94 million for Q1 2025, primarily due to new business volume and decreased funding costs, partially offset by a decrease in the fair value of designated financial derivatives, with net effective spread also increasing by $6.9 million to $89.99 million | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---|\ | Net interest income | $90.94 | $86.37 | | Net interest yield % | 1.15% | 1.15% | | Net effective spread | $89.99 | $83.04 | | Net effective spread % | 1.17% | 1.14% | - The $4.6 million year-over-year increase in net interest income was primarily attributable to a $6.4 million increase from net new business volume and a $0.6 million decrease in funding costs, partially offset by a $1.9 million decrease in the fair value of designated financial derivatives173 - The $6.9 million year-over-year increase in net effective spread was primarily due to a $6.4 million increase from net new business volume and a $0.6 million decrease in funding costs, with a 0.03% increase in percentage terms attributable to a shift towards higher-yielding assets147177 Provision for and Release of Allowance for Losses and Reserve for Losses Farmer Mac recorded a net provision of $1.58 million to the total allowance for losses in Q1 2025, a significant change from a $1.87 million net release in Q1 2024, primarily driven by new loan volume in Infrastructure Finance and Agricultural Finance | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | |:---|:---|:---|\ | Beginning Balance (Allowance for Losses) | $23.67 | $16.59 | | Beginning Balance (Reserve for Losses) | $1.62 | $1.71 | | Provision for/(release of) losses | $1.68 | $(1.80) | | Recovery | $0.08 | $0.00 | | Ending Balance (Allowance for Losses) | $25.44 | $14.79 | | Ending Balance (Reserve for Losses) | $1.52 | $1.64 | | Total Allowance for Losses (Ending) | $26.96 | $16.43 | - During Q1 2025, Farmer Mac recorded a $1.6 million net provision to the total allowance for losses, primarily due to new loan volume in the Infrastructure Finance and Agricultural Finance lines of business180 Guarantee and Commitment Fees Guarantee and commitment fee income increased by 14% to $4.48 million for Q1 2025 compared to Q1 2024, primarily due to increased business volume in unused commitments within the Infrastructure Finance line of business, with non-GAAP core earnings fees at $5.5 million | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | Change ($ in millions) | Change (%) | |:---|:---|:---|:---|:---|\ | Contractual guarantee and commitment fees | $4.43 | $3.90 | $0.53 | 13% | | Guarantee obligation amortization | $1.76 | $1.78 | $(0.03) | (1)% | | Guarantee asset fair value changes | $(1.71) | $(1.77) | $0.06 | 4% | | Guarantee and commitment fee income | $4.48 | $3.92 | $0.56 | 14% | - Guarantee and commitment fee income increased primarily due to increased business volume in unused commitments in the Infrastructure Finance line of business181 - As adjusted for non-GAAP core earnings, guarantee and commitment fees were $5.5 million for Q1 2025, up from $5.0 million for Q1 2024181 (Losses)/gains on financial derivatives Farmer Mac reported a net loss of $2.64 million on financial derivatives for Q1 2025, a significant shift from a $2.08 million gain in Q1 2024, primarily driven by a $4.26 million increase in losses due to fair value changes influenced by long-term interest rates | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | Change ($ in millions) | Change (%) | |:---|:---|:---|:---|:---|\ | (Losses)/gains due to fair value changes | $(2.57) | $1.68 | $(4.26) | (253)% | | Accrual of contractual payments | $0.32 | $(0.03) | $0.35 | (1,035)% | | (Losses)/gains due to terminations or net settlements | $(0.38) | $0.43 | $(0.81) | (189)% | | (Losses)/gains on financial derivatives | $(2.64) | $2.08 | $(4.72) | (227)% | - Changes in the fair value of financial derivatives are primarily the result of fluctuations in long-term interest rates184 Operating Expenses Total operating expenses increased by 8% to $29.51 million for Q1 2025 compared to Q1 2024, mainly due to a 30% rise in general and administrative (G&A) expenses driven by higher IT infrastructure costs, transactional legal fees, hiring expenses, and servicing advance expenses, while compensation and employee benefits decreased by 3% | Expense Category | March 31, 2025 (in millions) | March 31, 2024 (in millions) | Change ($ in millions) | Change (%) | |:---|:---|:---|:---|:---|\ | Compensation and employee benefits | $17.75 | $18.26 | $(0.51) | (3)% | | General and administrative | $10.76 | $8.26 | $2.50 | 30% | | Regulatory fees | $1.00 | $0.73 | $0.27 | 38% | | Total Operating Expenses | $29.51 | $27.24 | $2.27 | 8% | - The decrease in compensation and employee benefits expenses was primarily attributable to lower short-term incentive compensation awards185 - The increase in G&A expenses was primarily attributable to an increase in information technology infrastructure costs, transactional legal fees, hiring expenses, and servicing advance expenses186 Income Tax Expense Income tax expense for Q1 2025 decreased by 7% to $13.47 million compared to $14.50 million in Q1 2024, with the effective tax rate remaining stable at 21.2% for Q1 2025, a slight decrease from 21.3% in the prior year | Metric | March 31, 2025 (in millions) | March 31, 2024 (in millions) | Change ($ in millions) | Change (%) | |:---|:---|:---|:---|:---|\ | Income tax expense | $13.47 | $14.50 | $(1.03) | (7)% | | Effective tax rate | 21.2% | 21.3% | - | 0.1% | Business Volume Farmer Mac's outstanding business volume increased by $0.2 billion to $29.76 billion as of March 31, 2025, from $29.52 billion at December 31, 2024, driven by a $0.7 billion net increase in Infrastructure Finance, which offset a $0.5 billion net decrease in Agricultural Finance due to AgVantage securities maturities | Line of Business | March 31, 2025 Net Growth/(Decrease) (in millions) | March 31, 2024 Net Growth/(Decrease) (in millions) | |:---|:---|:---|\ | Total Agricultural Finance | $(510.80) | $164.42 | | Total Infrastructure Finance | $743.11 | $211.79 | | Total Business Volume | $232.31 | $376.21 | - The $0.5 billion net decrease in Farm & Ranch during Q1 2025 was primarily attributable to maturities of AgVantage securities that counterparties did not re-issue, reflecting slower loan growth and less liquidity needs191 - The $0.4 billion net increase in Power & Utilities was primarily attributable to the purchase of a $0.3 billion AgVantage security191 - The $0.2 billion net increase in Broadband Infrastructure was primarily attributable to $0.2 billion of new commitments192 - The $0.2 billion net increase in Renewable Energy was primarily attributable to $0.3 billion in loan purchases and commitments, reflecting strong demand for renewable power generation and storage192 | Line of Business | March 31, 2025 Outstanding Business Volume (in billions) | December 31, 2024 Outstanding Business Volume (in billions) | |:---|:---|:---|\ | Total Agricultural Finance | $19.98 | $20.49 | | Total Infrastructure Finance | $9.77 | $9.03 | | Total | $29.76 | $29.52 | Outlook Farmer Mac anticipates continued business volume growth, particularly in Infrastructure Finance, driven by strong demand for renewable energy and broadband, while Agricultural Finance faces mixed dynamics with elevated interest rates and a tightening agricultural economy, and operating expenses are projected to increase due to investments in human capital and technology Business Outlook Farmer Mac expects continued business volume growth, with outstanding business volume and net effective spread increasing 3.1% and 8.4% respectively in Q1 2025 year-over-year, driven by significant growth in Infrastructure Finance segments (19.5%), while Agricultural Finance faces mixed dynamics but offers growth opportunities through new AgVantage facilities and expanded loan servicing capabilities - Farmer Mac's outstanding business volume and net effective spread increased 3.1% and 8.4% respectively in Q1 2025 versus Q1 2024, reflecting business model diversification and sector resiliency207 - Infrastructure Finance segments grew over $1.5 billion (19.5%) in Q1 2025, driven by increased financing for renewable energy projects and broadband infrastructure208 - Corporate AgFinance loan purchases and unfunded commitments increased 16.1% in Q1 2025 versus Q1 2024208 - Opportunities for profitable growth include alleviating liquidity, capital, and return-on-equity challenges for agricultural and infrastructure lenders, expanding loan servicing capabilities, and attracting institutional investors and nontraditional lenders209 Funding Farmer Mac's business benefits from natural hedges that help mitigate interest rate volatility, as rising rates tend to decrease prepayments but increase interest on excess cash, while declining rates increase loan volume but also prepayments, providing counterbalance against short-term interest rate changes - Farmer Mac's business benefits from natural business hedges that help mitigate vulnerability to interest rate volatility211 - When interest rates rise, prepayments tend to decline, but interest earned on excess cash and capital could increase; conversely, when interest rates decline, loan purchase volume often increases, but prepayments tend to rise as well211 Operations Farmer Mac anticipates ongoing increases in operating expenses over the next several years due to planned investments in human capital, technology, and business infrastructure, aiming to enhance capacity, efficiency, product delivery, and funding efficiency, supporting long-term strategic objectives and scalability - Farmer Mac anticipates ongoing increases in operating expenses over the next several years, aligned with planned expansion of investments in human capital, technology, and business infrastructure212 - These investments are designed to enhance capacity and efficiency, improve product delivery and funding efficiency, and drive scalability and consistency in loan onboarding and servicing212213 Agricultural Finance Industry Outlook Overall farm profitability has compressed in recent years, but the USDA forecasts a 22% increase in net cash farm income for 2025, driven by government support payments, while trade policy uncertainty and changing environmental/immigration laws could introduce volatility, and land values moderated in late 2024 with subdued growth expected in 2025 - USDA forecasts a 22% increase in net cash farm income for 2025, fueled by a $33 billion increase in government support payments214 - Commodity prices stabilized in Q1 2025 for some crops, with lower feed costs benefiting the livestock sector215 - Trade policy uncertainty, changing environmental regulations, and immigration laws under the new administration could impact the agricultural sector, potentially increasing volatility216217 - Farmland value growth rates moderated in late 2024 due to higher interest rates and stagnating commodity prices, with subdued growth expected in 2025221 - Drought conditions increased in intensity and prevalence in Q1 2025 across several western and southwestern states, including nearly one-quarter of California225 Infrastructure Finance Industry Outlook The Power & Utilities sector saw increased electricity sales and revenue in 2024, with stable financial performance for Farmer Mac's loans, and Renewable Energy capacity is projected to grow significantly, creating new financing opportunities, while Broadband Infrastructure is experiencing rapid growth due to digital technologies and federal funding, though new political leadership and policy changes could introduce challenges - U.S. Energy Information Administration data shows a 2.2% annual increase in electricity sales and a 3.5% increase in revenue in the last 12 months through January 2025228 - Renewable electricity capacity is expected to grow by 128% in the next ten years, compared to total electric capacity growth of 46%, driven by falling costs and investor interest230 - Broadband infrastructure is experiencing rapid growth due to digital technologies, AI, cloud computing, and federal funding programs (e.g., BEAD, RDOF, ReConnect), leading to increased investments in fiber networks and data centers231 - Changes in tax policy, trade, and immigration laws under new political leadership could lead to delays and increased costs for renewable energy and broadband infrastructure projects232 Legislative, Regulatory, and Political Outlook Farmer Mac is closely monitoring several legislative and regulatory developments, including the Administration's wide-ranging tariff plan, which could impact agricultural exports and infrastructure project costs, though a 90-day pause on reciprocal tariffs was issued for many partners (excluding China), and changes in FCA leadership, new cyber risk management rules, and the upcoming consideration of expiring Tax Cuts and Jobs Act provisions and the farm bill reauthorization are also key areas of focus - The Administration issued an executive order on April 2, 2025, unveiling a universal 10% tariff on all countries, with major U.S. trading partners announcing retaliatory tariffs233 - A 90-day pause on reciprocal tariffs was issued on April 9, 2025, for dozens of U.S. trading partners, but did not apply to China233 - Tariffs and trade restrictions may lead to higher domestic inventory levels of agricultural commodities, lower prices, and supply chain disruptions for infrastructure projects233234 - Congress is expected to consider significant issues in 2025, including expiring provisions of the Tax Cuts and Jobs Act of 2017, the debt ceiling, annual spending bills, and the reauthorization or extension of the farm bill, which expires on September 30, 2025235 Balance Sheet Review Farmer Mac's total assets increased by 2% to $31.80 billion as of March 31, 2025, primarily due to new loan volume and a larger investment portfolio, while total liabilities also increased by 1% to $30.28 billion, mainly from higher notes payable to fund asset acquisitions, and total equity grew by 2% to $1.53 billion, driven by an increase in retained earnings | Metric | March 31, 2025 (in billions) | December 31, 2024 (in billions) | Change ($ in millions) | Change (%) | |:---|:---|:---|:---|:---|\ | Total assets | $31.80 | $31.32 | $479.20 | 2% | | Total liabilities | $30.28 | $29.84 | $442.58 | 1% | | Total equity | $1.53 | $1.49 | $36.62 | 2% | - The increase in total assets was primarily attributable to new loan volume and a larger investment portfolio236 - The increase in total liabilities was primarily due to an increase in total notes payable to fund the acquisition of loan volume237 Risk Management Farmer Mac manages various risks, including credit risk in its loan and guarantee portfolios, counterparty risk with AgVantage issuers and swap counterparties, and credit risk in its investment portfolio, with interest rate risk managed through duration matching and financial derivatives, and MVE sensitivity showing a (3.7)% change for a +100 basis points shift and a 3.3% change for a -100 basis points shift in the yield curve as of March 31, 2025 Credit Risk – Loans and Guarantees Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans was $12.4 billion as of March 31, 2025, with 90-day delinquencies in this portfolio increasing to $160.0 million (1.29%) from $108.9 million (0.88%) at December 31, 2024, primarily in permanent plantings and crops in the Southwest, and substandard assets also increasing to $466.0 million (3.8%), while Infrastructure Finance loans had no 90-day delinquencies - Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans was $12.4 billion across 48 states as of March 31, 2025238 | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | |:---|:---|:---|\ | Agricultural Finance 90-Day Delinquencies | $160.0 | $108.9 | | % of Agricultural Finance Mortgage Loan Portfolio | 1.29% | 0.88% | | Agricultural Finance Substandard Assets | $466.0 | $398.3 | | % of Agricultural Finance Mortgage Loan Portfolio | 3.8% | 3.2% | - The increase in 90-day delinquencies was primarily driven by increased delinquencies in permanent plantings and crops, concentrated in the Southwest region240 - As of March 31, 2025, there were no 90-day delinquencies in Farmer Mac's Infrastructure Finance loan portfolio, and two substandard assets totaling $42.2 million260 Credit Risk – Counterparty Risk Farmer Mac manages counterparty credit risk with AgVantage issuers, lenders, servicers, and interest rate swap counterparties by requiring creditworthiness standards and collateralization levels, with no credit losses experienced to date on AgVantage securities, and swap counterparties managed through collateralization provisions and cleared derivatives, ensuring no uncollateralized net exposures - Farmer Mac manages institutional credit risk related to AgVantage counterparties by requiring them to meet creditworthiness standards and maintain specified collateralization levels267 - As of March 31, 2025, Farmer Mac had not experienced any credit losses on any AgVantage securities over the life of the program268 - Farmer Mac manages institutional credit risk related to interest rate swap counterparties through collateralization provisions and the use of cleared derivatives, with no uncollateralized net exposures as of March 31, 2025273300 Credit Risk – Other Investments Farmer Mac's cash and cash equivalents totaled $1.0 billion and investment securities $6.3 billion as of March 31, 2025, managed under strict internal policies and FCA regulations requiring high creditworthiness, low credit risk, and adherence to concentration limits to minimize market volatility exposure and preserve capital - As of March 31, 2025, Farmer Mac had $1.0 billion of cash and cash equivalents and $6.3 billion of investment securities274 - Investments must meet high creditworthiness standards (very strong capacity to meet financial commitments, very low risk of default) and exhibit low credit risk, consistent with FCA Liquidity and Investment Regulations275 - Farmer Mac's internal policy limits total credit exposure to any single entity, issuer, or obligor of securities to 5% of its regulatory capital ($77.7 million as of March 31, 2025), excluding U.S. government agencies or GSEs276 Interest Rate Risk Farmer Mac manages interest rate risk to generate stable earnings across various interest rate environments, primarily by funding asset purchases with duration-matched debt and financial derivatives, using interest rate swaps and callable debt to mitigate prepayment risk and align cash flows, maintaining a positive effective duration gap of 3.7 months, and showing MVE sensitivity of (3.7)% for a +100 bps shift and 3.3% for a -100 bps shift - Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt and financial derivatives that have similar duration and convexity characteristics281 - Farmer Mac uses financial derivatives, primarily interest rate swaps, and callable medium-term notes to better match asset and liability durations and mitigate prepayment risk283296297 | Interest Rate Scenario | March 31, 2025 MVE Change (%) | December 31, 2024 MVE Change (%) | |:---|:---|:---|\ | +100 basis points | (3.7)% | (4.0)% | | -100 basis points | 3.3% | 3.6% | | +100 basis points | 0% | (0.8)% | | -100 basis points | 0.7% | 1.6% | - As of March 31, 2025, Farmer Mac maintained a positive effective duration gap of 3.7 months, indicating that the fair value change of its interest-earning assets is more sensitive than its debt and financial derivatives to small interest rate movements295292 Liquidity and Capital Resources Farmer Mac's liquidity and funding needs are met through debt issuances, fees, net effective spread, and asset repayments, maintaining steady access to debt capital markets with $1.9 billion in discount notes and $26.1 billion in medium-term notes outstanding as of March 31, 2025, and a monthly average of 290 days of liquidity in 2025, well above the 90-day regulatory minimum, while remaining in compliance with all statutory capital requirements at "level 1" - Farmer Mac's primary sources of funds are debt issuances, guarantee and commitment fees, net effective spread, and asset repayments306 - As of March 31, 2025, Farmer Mac had $1.9 billion in discount notes and $26.1 billion ($8.2 billion within one year, $17.9 billion after one year) in medium-term notes outstanding306 - Farmer Mac maintained a monthly average of 290 days of liquidity throughout 2025, exceeding the minimum 90 days required by regulations, and had 289 days of liquidity as of March 31, 2025307 - Farmer Mac was in compliance with its statutory capital requirements as of March 31, 2025, classified as "level 1" (the highest compliance level)310 Other Matters This section indicates that there are no other material matters to report - No other matters were reported313 Supplemental Information This section provides quarterly and annual supplemental information on new business volume, repayments of assets, outstanding business volume, and net effective spread by segment, with new business volume for Q1 2025 at $1.84 billion, total repayments at $1.59 billion, outstanding business volume reaching $29.76 billion, and net effective spread at $89.99 million with a yield of 1.17% | Metric | March 31, 2025 (in billions) | |:---|:---|\ | New Business Volume | $1.84 | | Total Repayments of Assets | $1.59 | | Outstanding Business Volume | $29.76 | | Net Effective Spread | $0.09 | | Net Effective Spread Yield | 1.17% | - New business volume for Q1 2025 was $1.84 billion, with Infrastructure Finance contributing $978.1 million and Agricultural Finance contributing $819.5 million314 - Total repayments of assets for Q1 2025 were $1.59 billion, comprising $1.20 billion in scheduled repayments and $388.76 million in unscheduled repayments315 Item 3. Quantitative and Qualitative Disclosures About Market Risk Farmer Mac is exposed to market risk from changes in interest rates, which it manages through financial transactions, including derivatives, and by monitoring its exposure, with further details on interest rate risk management strategies provided in the Management's Discussion and Analysis section - Farmer Mac is exposed to market risk from changes in interest rates321 - Market risk is managed by entering into various financial transactions, including financial derivatives, and by monitoring and measuring exposure to interest rate changes321 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of Farmer Mac's disclosure controls and procedures as of March 31, 2025, and concluded they were effective, with no material changes in internal control over financial reporting during the quarter - Farmer Mac's disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective as of March 31, 2025323324 - There were no changes in Farmer Mac's internal control over financial reporting during Q1 2025 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting325 PART II Item 1. Legal Proceedings This section states that there are no legal proceedings to report - No legal proceedings were reported327 Item 1A. Risk Factors Information regarding risk factors is referenced to the "Forward-Looking Statements" section within Item 2 of this Form 10-Q and Part I, Item 1A of Farmer Mac's 2024 Annual Report - Information about risk factors can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements" in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A of Farmer Mac's 2024 Annual Report328 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, Farmer Mac issued 401 shares of Class C non-voting common stock to directors electing stock in lieu of cash retainers, and made various grants of Stock Appreciation Rights (SARs) and Restricted Stock Units (RSUs) to executive officers and employees as incentive compensation - Farmer Mac issued 401 shares of Class C non-voting common stock in January 2025 to directors who elected to receive stock in lieu of cash retainers, based on a price of $196.95 per share329 - On March 6, 2025, Farmer Mac granted 2,541 SARs, 765 target performance-vested RSUs, and 1,530 time-vested RSUs to executive officers, and 18,699 time-vested RSUs to non-executive employees as incentive compensation330335 - A new director received 358 time-vested RSUs on March 26, 2025, scheduled to vest on March 31, 2026331 Item 3. Defaults Upon Senior Securities This section indicates that there are no defaults upon senior securities to report - No defaults upon senior securities were reported332 Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to Farmer Mac - Mine safety disclosures are not applicable332 Item 5. Other Information This section confirms that none of Farmer Mac's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025 - None of Farmer Mac's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025333 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including financial statements, articles of incorporation, by-laws, specimen certificates for various stock classes, descriptions of securities, and certifications from the principal executive and financial officers - The exhibits include financial statements, articles of incorporation, by-laws, specimen certificates for various stock classes, descriptions of securities, and certifications from the principal executive and financial officers334336 Signatures Signatures The report is duly signed on behalf of Federal Agricultural Mortgage Corporation by Bradford T. Nordholm, President and Chief Executive Officer, and Aparna Ramesh, Executive Vice President – Chief Financial Officer and Treasurer, as of May 9, 2025 - The report was signed by Bradford T. Nordholm, President and Chief Executive Officer, and Aparna Ramesh, Executive Vice President – Chief Financial Officer and Treasurer, on May 9, 2025339
Federal Agricultural Mortgage (AGM_A) - 2025 Q1 - Quarterly Report